New Year, New Books!

As we jump into a new year, it may be a good time to not only examine your personal health but also your business’.  In doing this, it would be a good time to do a review of current accounting processes and procedures in place for any toning needed for the new year. We have compiled a list of best practices Breakwater lives by to implement as part of your business’ New Year’s resolution. 

Have a clear concise chart of accounts

Have a minimum number of chart of accounts that still allow for enough detail to make business decisions.  Clean chart of accounts can also help with budgeting, forecasting, and providing tax preparer with correct information. 

Reconcile bank balances monthly to third party statements

Performing reconciliations monthly is a great way to ensure the records are in agreement with third party balances.  This will help in catching any errors in a timely manner.

Attaching source documentation to transaction for ease of access and accountability

A good internal control is attaching source documents directly to the accounting transaction within your accounting system.  This provides for an audit trail and allows for easy access to documents if needed. 

Perform a high level review of financials 

Monthly review of a balance sheet and profit and loss statement in order to analyze trends and overall financial health of the company.  This process may also help identify potential categorization errors if there are large variances during comparison to budgets. 

Collect form W-9s from any new vendors prior to payment to aid in year end form 1099 preparation.

As a best practice, a Form W-9 should be completed prior to initial payment to the vendor in order to help in the year end Form 1099 preparation for the business.  By requesting prior to payment, this incentivizes the vendor to provide the completed form to you.

Be open to leveraging cloud based accounting softwares and applications to streamline accounting processes. 

Overall, this will provide for more accurate financial data in real-time also allowing for access anywhere at any time.  Cloud based accounting creates efficiencies in internal processes through automation. 

Keep personal income and expenses separate from the business

Will provide for more clear and accurate financial records as well as having a clean set of financials for your tax preparer.

Meet with tax preparer regularly to discuss tax planning

For tax planning purposes, meet regularly with your CPA to discuss current financial health as well as any plans for the business on the horizon in order to consider any potential tax consequences. 

By implementing these practices your business’ financials will be in great shape throughout the year, leaving you time to focus on your personal resolutions.

Your financial statements are trying to tell you something! Do you speak their language?

I grew up in Quebec so my first language is French. (You might not know that since I have no accent at all.) Though we’ve been married more than 15 years, my husband still doesn’t understand what I’m saying when I speak French to our boys (even when we’re talking about him). He’s missing out on a lot of very interesting information!

Your financial statements have very valuable information for you, too, if you speak their language. (And I promise it’s easier than learning French.)

Many businesspeople focus almost exclusively on cash. If cash coming in exceeds cash going out—and maybe a surplus is accumulating—all is good, and the analysis stops there. It’s certainly better to accumulate cash rather than drain cash, but if you don’t look any deeper than that, you are probably missing opportunities to improve your business. Better understanding where you earn money (and maybe where you lose money) can help you improve your margin and decide how you want to grow. Time invested up front to organize your financial statements so they provide this insight can yield big dividends quickly.

Key to unlocking this powerful information is organizing your financial statements effectively. All businesses can prepare a chart of accounts that separates revenue and expenses in categories that can be monitored and allocated easily (e.g., material, salaries, benefits, rent, utilities) to prepare a simple profit and loss (P&L) statement. But with only this information, a businessperson can’t make many decisions other than “I need to grow revenue!” or “I need to reduce expenses!” This is true, but not useful! You need to understand where to grow or where to cut. To do so, you’ll need to break your P&L into smaller components, organized by client, service, job, or product.   

This is easier than it sounds. Breakwater has for-profit clients ranging from law and accounting firms to construction and contracting businesses to restaurants and retail stores to the creative arts and more. (One of my favorite aspects of this work is learning about our clients’ businesses so we can help them grow.) Almost every one of these businesses has multiple business lines or products with varying costs and profit margins. Organizing a business’s financial statements by component, and allocating costs more precisely, almost immediately yields insight on how to improve.

For instance, you might sell a variety of different products or services. You might think the biggest seller is your “best,” as it generates the most revenue. If you don’t allocate your costs accurately, though—whether time (labor) or materials—you might be overstating the value of one segment or undervaluing another.

Why does this matter? I have worked with clients who, as soon as they more precisely allocated their costs, realized that parts of their business had been operating at a loss for years. As soon as they stopped that activity, they were more profitable.

You might uncover a similar opportunity in your business. And if not, it is still worth investing some time to understand what your financial statements can tell you, beyond just your cash flow. And I promise — it’s easier than learning a foreign language!

Sincerely, Your French Canadian Accountant Extraordinaire, Marie-Eve DeSantis

Inc. 5000 company Breakwater Accounting + Advisory partners with Cultivate Advisors

Breakwater Accounting + Advisory, an Inc. 5000 top private company of 2021, is excited to announce a new partnership with Cultivate Advisors, a Chicago-based firm that offers business advisory services to passionate owners and leaders across the U.S. As an independent subsidiary of the Cultivate network, Breakwater will expand its resources and nationwide presence while continuing to help clients build financially successful businesses and nonprofit organizations.

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Our Interns Have Our Hearts!

Hi y’all! My name is Morgan Zebley and I was an Intern at Breakwater Accounting + Advisory for 14 months ranging from the beginning of summer 2020 until present day at the end of summer 2021. I am originally from the Wilmington, Delaware area and I attend the University of South Carolina with a major in Accounting and Marketing. 

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Back to the office…Sometimes!

We are a step closer to a sense of normalcy. At Breakwater, we will continue with a hybrid model for the rest of 2021 at least. Some choose to come to the office every day, some continue to work from home, and many choose to come to the office two or three days each week. For those fully vaccinated, maskless is the look!

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Treasurers and Finance Committee Members – Are you getting what you need to be a valuable board member?

The definition of the role of a treasurer or finance committee member includes key themes like “general financial oversight”, fundraising, financial planning, budgeting, monitoring, and strategic planning. It is your job to be a partner to the Executive Director/CEO and help take the organization to the next level. The organization is relying on you for your extensive knowledge, background, and let’s be honest, fundraising contacts.

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